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Mass. treasurer wants Internet tax to help cut sales tax

State House News Service

Updated:
12/20/2012 08:12:15 AM EST

If Congress enables states to collect sales taxes from all Internet retailers and Massachusetts legislators put in place a suitable transportation-financing plan, Treasurer Steven Grossman said he would want to see the new Internet sales revenues put toward reducing the sales-tax burden.

"Since the sales tax is a highly regressive tax -- and everybody knows it -- my proposal would be that we take all of those revenues that I was planning and would have invested in transportation infrastructure, and use them to reduce the state sales tax," Grossman told the News Service on Wednesday.

Grossman said the Marketplace Fairness Act has bipartisan support in Congress, and said that if transportation, infrastructure and education are adequately financed any revenues gained from Internet sales should go toward reducing the sales-tax rate.

If online retailers had to collect and remit state sales taxes, that would have generated $23 billion nationwide and $387 million for Massachusetts in 2011, Grossman said. The use of $400 million in new revenue would allow the state to reduce the sales tax from 6.25 percent to about 5.75 percent, Grossman said.

Grossman said he had not spoken to Gov. Deval Patrick, House Speaker Robert DeLeo or Senate President Therese Murray about the reduction in sales tax, an idea Beacon Hill Republicans have pushed without success since Patrick and the Democrat-controlled Legislature raised the sales-tax rate from 5 percent in 2009. Transportation was one area of state spending that benefitted from the sales-tax hike.

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Patrick, who is trying to get a $540 million fiscal 2013 budget gap under control, recently came to an agreement with online giant Amazon to start collecting Massachusetts taxes. A spokeswoman for Gov. Patrick declined to comment on Grossman's idea.

Transportation Secretary Richard Davey recently said that the state was still collecting ideas for the transportation financing package and that a range of options would be under consideration.

"If between the governor and the Legislature there is a revenue package that ends up passing and the purpose of those funds are primarily transportation, infrastructure and education, those are the principal goals, and you deal in a significant and substantive way with the crisis of transportation infrastructure," Grossman said. "Then I would absolutely and strongly and unequivocally advocate for -- if the Internet sales tax legislation in Washington passes and now requires not only Amazon but all the other retailers to collect the sales tax -- I'd want to see this regressive sales tax of ours, which is now 6.25 percent, reduced, initially below 6 percent, and hopefully to 5.75."

Grossman had previously proposed using the $400 million in potential Internet sales tax dollars to help fund the state's ailing transportation system, and said he approached the Internet sales tax from the perspective of putting brick-and-mortar retailers and Internet retailers on equal footing.

"I said, first of all this is an issue of Main Street fairness. Retailers in Massachusetts have been living on an unlevel playing field for years. They've been at a significant disadvantage," Grossman said. "If you can go online and get free shipping, free wrapping and no sales tax, you're going to do it."

Grossman is mulling a run for governor and Patrick has said he will serve out his term ending in 2014 and then enter the private sector.

"I continue to take a hard look," Grossman told the News Service about where he stood in his decision-making. He said, "I'm not going to drag out the decision-making process."

Grossman said providing sales-tax relief on the heels of a revenue proposal would be welcomed.

"What package comes out of the governor's office, what package goes to the Legislature, I don't know the details of that. That has not been shared with me, what the ingredients of that are. What would, I think, be incredibly difficult for the people of Massachusetts to swallow would be a sense that 'There they go again. Double taxation. We took the sales tax from 5 to 6.25. We may potentially see an increase in our income taxes, and we need some relief," Grossman said. He also said, "What I'm saying is take that money and return it back to the people of Massachusetts as a way to say, 'We know this is a regressive tax. We know you feel burdened by it. We know that middle class families are struggling for every dollar.'"

Diverting the hypothetical Internet sales tax towards lowering the rate would not necessarily reduce the sales-tax funding streams used by both the MBTA and the Massachusetts School Building Authority because both of those take a penny out of every dollar spent, not a percentage of the total sales-tax proceeds.

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